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Questions nonprofits should ask when choosing a banker

Chad Faul
09.03.19
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Driven by passion and community, nonprofits face unique financial hurdles. Uncertain revenue sources. Lean operations. Pressure to put more money toward the mission. These challenges make it all the more important to have a banking partner you can trust. This means asking potential bankers the right questions and getting to the heart of how they plan to serve you now and in the future.

1. What percentage of your clients are in the nonprofit sector?

Banks can claim to understand the nonprofit sector, but if only a sliver of their book is comprised of nonprofit clients, they may not have the level of expertise you need. This doesn’t mean the entire bank needs to be completely focused on nonprofit business, but a banker who is immersed in this space will have a pulse on what other nonprofit organizations are experiencing. They can use what they’ve learned works for other clients to design a better solution for you.

2. How often will we meet to re-evaluate my banking needs?

If the answer is “as often as you want,” it’s likely you won’t be getting much in the way of a collaborative partnership. Your banker should be proactive in building a relationship with you, checking in with calls and regularly scheduled meetings, bringing new ideas and options to your attention, and keeping tabs on how your organization is growing and changing. The frequency of these check-ins may vary depending on size and type of operation, but you want to make sure your banker is staying on top of what you need rather than reacting to what you’re asking for.

3. How will our mission come into play?

This is a complicated question, because your mission is the why behind your existence. Everything you do ladders up to your mission and you want your banker to understand this as they help you make decisions. But a good banker knows you can’t fulfill your mission if you aren’t managing your margin. They should be focused on helping you run a financially strong organization, so you can do more with your dollars. Well-managed expenses and a healthy bottom line mean you can stay focused on making smart choices that support your mission rather than worrying about where your next donation is coming from.

4. Do you work with nonprofits differently than for-profit clients?

Bankers who truly understand the nonprofit space know these organizations often have different needs than for-profit companies. They should be patient with the slower pace, but ready to move quickly to capitalize on new opportunities as they arise. Many also offer lower rates and fees for nonprofits and know how to navigate specialized products designed to help organizations like yours. 

5. How often do you work with tax-exempt loans?

One such specialized product is a tax-exempt loan. While most bankers can help a nonprofit get a tax-exempt loan, if they aren’t familiar with the process, it can take longer to get the financing worked out. In some cases, they may even need to hire an advisor, which can add costs. A banker who has existing relationships with the bond attorneys and issuers who handle these loans can get you through the process much more efficiently.

6. What solutions would you recommend for a nonprofit?

This one is a bit of a trick question, but it gives you the opportunity to understand how your banker will approach your business. If they pull out a catalog and start ticking off a laundry list of products before even talking to you about your needs, they probably won’t be a strategic long-term partner. Instead, they should review your current financials, ask about your pain points, work through your goals and then talk through the products that they think might be best for your needs. Bonus points if they give you examples of how they’ve built a solution to help other nonprofits address similar needs.

7. How can you help us weather the ups and downs?

Sometimes working with a nonprofit means a banker has to get a little creative. This might involve being strategic about how you manage money when revenue dips or providing a bridge loan structured around a capital campaign. In some cases, it might mean your banker has to get comfortable with variability in cash flow. They should be willing to roll with you if a grant falls through or donations fall short and find ways to get you over these hurdles.

8. Who can I call for a reference?

The nonprofit sector is unique in that organizations talk to each other. They collaborate in order to better serve the community. Your banker may have all the right answers, but they should also be able to point you to other clients who can vouch for the services they offer. Don’t be afraid to ask for a list of references.

You’ll note that none of these questions focus on rate and pricing. While questions of that ilk may get you the answers you want to hear, they likely won’t get the collaborative relationship you need. Keep the conversation focused on your potential banker’s approach and understanding of your operations to ensure you choose someone you can rely on to help you run a healthy organization.

Chad Faul

About Chad Faul

Chad has more than 17 years of financial experience, starting his career in finance as a financial analyst and later as a portfolio manager/credit analyst in the health care and nonprofit division at U.S. Bank. Chad also briefly held a position as a financial institution examiner for the North Dakota Department of Financial Institutions. Having spent more than 13 years as a business banker for nonprofits, Chad understands the unique challenges and regulatory issues faced by nonprofit organizations. He uses his in-depth knowledge of the industry to provide financial solutions and identify opportunities relevant to nonprofits. A graduate of finance and economics from the University of North Dakota, Chad is also a board member of the Boys & Girls Clubs of the Twin Cities.)

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